Assume that a 50 per cent petrol tax led to a large increase in its price and only a small decrease in the quantity of petrol demanded.Economic analysis would lead one to conclude that________.
A)petrol should be taxed because the benefits of the tax would exceed the costs.
B)petrol should not be taxed because the benefits are uncertain.
C)petrol should not be taxed on ethical grounds since ethical benefits and costs cannot be measured.
D)the benefits of taxing petrol is a normative issue.Economic analysis can be used to contribute to discussion of this issue but cannot decide it.

Question

Quizplus · Accepted Answer

The statement reflects that the question of whether petrol should be taxed is a normative issue, which involves judgments about what ought to be. Economic analysis can provide data and projections about the effects of a petrol tax (such as its impact on demand, revenue generated, and potential environmental benefits), but whether these effects are considered beneficial or harmful involves value judgments that go beyond pure economic analysis. Thus, while economics can inform the debate on taxing petrol by analyzing potential outcomes and trade-offs, the decision to tax petrol ultimately involves ethical, environmental, and social considerations that economics alone cannot resolve.

Assume That a 50 Per Cent Petrol Tax Led to a Large